surprise from realtor -- did I scam myself??

deanie1February 11, 2010

I have been interviewing realtors to sell my house, but haven't chosen one yet and property is not listed yet. Yesterday one of them called and said she had a potential buyer and wanted me to let her show this couple our house since they happened to be in the neighborhood. She had me sign a contract for a one-time showing -- the contract said I'd still have to pay her 6% commission if they bought it. Is this common practice? Should I have bargained and said "hey, you haven't done anything to market my house so how about 4 or 5%?" Was I dumb to sign that contract for 6%? The couple liked the house but haven't put in an offer. Thank you!

I wouldn't go a far as calling you "dumb", but you made a bigtime mistake...Normally a listing will have a 6% commission to be split equally with the buyer's agent and seller's agent, hence you should have been asked to sign a 1 time agreement for 3%...The thing you have going in your favor is you can turn down ANY offer, so unless the offer comes in at full price with no exceptions or give-backs,nothing lost by signing this...Though this agent is a not a reputable agent,imho..

The agent is bringing you a potential buyer - why would you care that she hadn't done anything to market your house? You're most likely going to pay 6% or close to it to have your house listed by a full-service agent anyway, so why would you care if the 6% is going to go to one agent or be split by two agents? If this goes through, you've avoided the headache, not to mention the uncertainty, of actually having your house listed for sale.

I do have some questions/issues for you: Since the house isn't currently on the market, how did you arrive at an asking price? Has anyone performed a CMA for you? How would you handle negotiations?

I personally would not have agreed to 6%. Not because 6% isn't fair to "sell" your house, but because this agent either works in your best interest or in the buyers best interest. You can't do both. A full service agent is supposed to be more than a matchmaker. They are who you will be relying on to negotiate offers, terms, conditions etc. As is, you are paying full price but only getting half the service.

"The thing you have going in your favor is you can turn down ANY offer, so unless the offer comes in at full price with no exceptions or give-backs,nothing lost by signing this...Though this agent is a not a reputable agent,imho.."

You have learned just one of the many sneaky ways real estate agents work. Do yourself a favor and don't sign anything again. At least without running it past a real estate lawyer (or the readers at this forum) first.

If you go with an agent, don't sign for longer than 3 months and make sure another agent in the office can handle the listing if you don't get along with them (or they die). That way if they are lax in showing the house, don't provide flyers for the box, don't market it properly (good pics on the internet, etc) or are rude to potential buyers, you won't be stuck with them for months on end. YOU are the one who will still be paying the mortgage$$$, taxe$$$, utilitie$$$ etc until the house is sold.

So make sure whoever you hire is going to be worth that huge commission they will be earning. If you think they are doing a good job then you can always extend the contract. Take notes, make sure the agent gives you feedback from buyers so you can adjust your selling strategy accordingly.

One more thing. When you finally decide on an agent, DON'T tell them every little detail about your life and why you are selling. We can't count the number of seller's agents who blabbed about their client selling because of divorce, loss of jobs, crappy neighborhood, etc. You would have thought they were working for US! You can see how that kind of information could kill a sale or make it easier for us to get your house at a price WE (not you) can live with.

It wouldn't have ruffled my feathers too much. If a realtor you contracted with had a conventional contract with you, you'd have paid out the six percent, regardless of how it were split.

Yes, you could have negotiated a reduced commission, but it wasn't out of line. Yes, one day contracts are typical here for houses not on the market. Geeze........LOL.........if this agent showed your house and it sells..........you're ahead of the game. It's such a common thread on this forum you do whatever it takes to get a house shown (staging, leaving the house at inconvenient times) and this one fell out of the sky. Why not grab it. That agent has to cover their butt with a short term contract. They're the one with a potential in their pocket.

It's your job, however, to find out what the house is worth. You are pretty much acting as your own selling agent. I've property I am not listing on the market, but have had agents ask if they can show. Mine is appraised, and I'm not in any hurry to sell. I've been asked to do that. I was OK with it. I knew the agent, but if she didn't have a potential she thought she could match with it, she wouldn't have gone through the trouble for a 24 contract. What does it gain her just for a one day listing?

Thanks everyone. I did get market analyses from three different realtors and they all came in with about the same suggested listing price so I went with that. BUT I may have screwed myself worse than what I thought--this was not a one DAY contract. It was an "agreement to show property" to these people only. The agreement says she gets her 6% if they (and only they) buy any time within the next three months. Kosher?

Oh, and an appraiser is coming tomorrow. I still haven't legally listed it yet.

"The agreement says she gets her 6% if they (and only they) buy any time within the next three months. Kosher? "

Yes. This is a standard clause in listing contracts, so that buyers don't come back and buy it as a FSBO or from another listing agent after the first agent did the work and brought the buyer in.

"If these people offer my full price, do I have to sell it to them?"

No. You don't have to accept the contract they offer. But if you want to sell and get a fair market value, I think you should. Not all sales happen so easily... no months and months of keeping house always in "show" condition.

Deanie.........your questions aren't silly. Have you sold a house before? It's wise to know what is normal/not so normal. It's OK to be conservative and involved in what/how an agent handles one of your most valuable possessions. But, try to relax just a little ( smiling here and trying to reassure you). If you have realtors eager to show a house you haven't even listed......then you are probably in a very 'good place' compared to a lot of people who are trying to sell homes. Most real estate transactions through professional agents aren't scams or shell games. Mind games sometimes....but they're not all horror stories. I've bought and sold many times and only once had to yank an attorney in on a deal. It's too soon to be using words like scam and getting screwed. Good luck on your house, btw.

If your house is priced reasonably, btw it is a very good thing if you accept a full-price offer. It sounds to me that you are second guessing your asking price. It's not a good time, btw, to get greedy. Too many bargains out there to be had.

I have never ever sold a house before. I asked if I had to sell if I get a full price offer because I wanted it appraised first before I listed it, but this realtor had me commit to these people the price on the agreement. But now I think I probably will keep this price regardless of the appraisal because three realtors suggested the same price range. And, yes, especially with all the foreclosures around, I don't want to be greedy.

Do seek the counsel of a real estate attorney before signing anything else if you do get an acceptable offer. Don't expect a real estate agent-even a "listing agent or seller's agent" to act in your best interest. They earn their living through sales not by being your best friend.

There are no ethical requirements for selling a home. There are contractual requirements for anything you sign and some basic legal requirements that vary by state. Many agents have standard contracts that require you to pay their commission if they bring you in a full price offer with no contingencies and then you turn them down. It protects them from doing lots of work and then having the seller get cold feet afterward.

Frankly though, if you get a full price offer with no contingencies, you hit the home sellers lottery! Collect your winnings and move on.

IMHO, a 1 time showing or 1 day showing contract should be signed for a little higher than half the standard/average commish in your area-- so 4% would work if 6% is normal. That gives the agent very good incentive to get the deal done quickly before you list it.

The other issue is that even though you signed a 6% on this one, commissions are always negotiable. IF these people do offer, you can refuse to sell unless the agent kicks in a percentage or two. If the agent refuses, then either the sellers kick in more money, you back down, or the house doesn't sell to these people and you list it.

Since you had this agent in for a listing presentation, be aware that they may be bringing around a friend or just one of their clients who isn't likely to be interested. They want your listing and showing that they are already working for you is a good way to get it. Those buyers may not be anywhere near qualified to buy your house. You don't know.

As others have said, in this market, if you get a good offer for market value, take the money and run! good luck!

Again, dear OP, please *check* any advice you get on any internet forum.

Here, in Texas, where I have been a real estate practitioner for about 25 years & a broker for nearly 20, full price offers with average or normal or customary provisions are considered to be...full price offers.

"Here, in Texas, where I have been a real estate practitioner for about 25 years & a broker for nearly 20, full price offers with average or normal or customary provisions are considered to be...full price offers."

By who?

The RE brokers and agents?

The listing contract does not say "with average or normal or customary provisions."

Contract law is painfully explicit (and I have been writing contracts with the government for services for 30+ years).
The broker as the originator of the listing contract is expected to have fully and clearly defined the conditions and services.

Any ambiguity (like not defining what is a "full price offer" clearly in the contract) will not prevail as ambiguities always go against the person who originated the contract.

How many times have you sued and prevailed to actually establish what is a "full price offer"?

It is usually a cudgel used by brokers and agents to threaten sellers, sometimes legitimately when the seller gets cold feet, but more often to ram a less than perfect offer down a seller's throat.

Any broker that actually tried to sue over a commission in a residential transaction would likely find themselves out of business in short order.

I'd like to see the listing contract that provides that a commission is due as long as a full-price offer is presented, not executed and fulfilled.

Maybe the moon is made of cream cheese too.

A listing price is not a contract. It is merely an invitation for an offer. And an offer without acceptance is not a contract. Trite law.

OP asked: Should I have bargained and said "hey, you haven't done anything to market my house so how about 4 or 5%?"

Yes you could have. And, yes, you can still bargain even after the agent brings you an offer. I was a sales rep and later a broker for 17 years and this was common. However, I always refused to bargain after an offer was brought in.

If the broker brings you a buyer ready, willing, & able to buy the house, he/she had fulfilled the contract, & you owe that broker the agreed fee.

Only if the listing agreement says that that act alone fulfills the contract. And only if the courts in that jurisdiction agree and it is possible to meet the burden of proving that the alleged buyer was ready, willing and able.

More typical is this Commission clause of the Ontario Real Estate Association:

"2. COMMISSION: In consideration of the Listing Brokerage listing the Property, the Seller agrees to pay the Listing Brokerage a commission
of............................% of the sale price of the Property or....................................................................................................................................
for any valid offer to purchase the Property from any source whatsoever obtained during the Listing Period and on the terms and conditions set
out in this Agreement OR such other terms and conditions as the Seller may accept. (Emphasis added.)"

In other words, the commission is payable only if the property has been sold.

Not sure what the point of this "full price offer" comment is. Until there is a contract you aren't bound to anything.

Even at full price there are a whole lot of things that can make an offer unacceptable. Timing of purchase, ability to pay etc. And even if there are no contingencies that really doesn't mean its a no brainer either. I can't force someone to buy my house even with a fully enforceable ironclad contract, if they can't afford nor finance the purchase.

if the broker is providing and or signing a contract they damn sure should understand it for their own protection as well as their clients, otherwise....

ready willing and able.... you can't prove any of that really until after closing, up until that point you have possible, best chance and maybe.

That's not sylviatexas's point. The question is if a real estate agent is entitled to a commission for just bringing in a full-price offer from a qualified buyer. In other words, fulfilling the contract between the seller and the agent. And, though it may be arguable in a Court for the reasons you mention, listing agreements can be written that way.

Interpretation of those contracts is done by the courts when somebody sues somebody else when the parties disagree over what the contract says."

Many (if not most states) do not have a state mandated RE contract.
Sounds like another reason to avoid Texas.

You are participating in the formulation of contracts as soon as you fill in a line on the mandated contract.

While the final interpretation may devolve to the courts (and that generally means the contract was poorly drawn or someone is being stupid and refusing to abide by what they agreed was the contract) the first thing the courts look to is the intent of the parties executing the contract.